When a purchase order is posted for an item, it writes the cost to the costing lot fields on the item record. Because you are using the LIFO method, posting will write to a unique costing lot # (as long as all 5 are not in use already, in which case the 2 oldest lots get combined).

When an item is sold (either via OrderEntry invoices and Day End, or Inventory shipments), the cost associated with the sale is subtracted from the inventory cost lost. Usually some unit cost * qty sold.

A residual cost is usually the result of selling all the items, and how the costs are subtracted from the item record. Sometimes this is related to letting inventory go negative (because the Most Recent Cost is used instead of a particular unit cost), and sometimes is related to other unit cost changes (such as applying an adjustment to a FIFO/LIFO costing lot). It sounds like the latter is related to your situation, and if you want to clear residual costs, then doing a cost-only adjustment is indeed a way to do this.

Maybe something in the Transaction history report (for that item only) can shed some light as to what happened over the last little while?